Tag Archives: finance

Financial Innovation

Recently I came across a couple of new peer-to-peer financial startups. With people feeling distrust towards mainstream banks in the wake of the financial crisis, it is likely that many of these financial startups will get a lot more attention in the near future. Here are two startups from my own home country, Estonia, which have been making headlines recently.


One such startup is Transferwise, the peer-to-peer online currency exchange from the creators of Skype and PayPal. The idea of this is to allow cheaper exchange of money between different currencies, by using the Reuters mid-market rate. It therefore offers a better rate then high street banks by taking the real currency value, in between the bid and offer price. At the same time, it is able to offer far lower service fees due to its limited overhead costs.

The way in which this works is as follows. For example, at any one time there might be one person who holds euros and wishes to purchase British pounds. At the same time, there is likely to be someone else who holds British pounds but wishes to purchase euros. Usually these two individuals would simply turn to a bank, buying at one rate, selling at another and incurring a transfer fee on top of the exchange rate loss. However, with Transferwise, the first individual holding pounds instead transfers these into the UK account of the second individual wishing to purchase pounds. The second individual holding euros then transfers these into the euro account of the first individual. The whole process is done via Transferwise accounts meaning that the money transfer is completed once both parties have sent their money in.

This process is best shown in Transferwise’s introductory video:

The only thing that now remains to be seen is whether this will be a knockout blow to high street banks or simply a “black eye”, as reffered to by The Economist.


The second financial startup that I came across was isePankur. This is another peer-to-peer innovation that cuts out the spread used by banks to make money. In this case, it does so by cutting out the difference in interest rates for savings and loans.

The way in which it works is that people looking to borrow money post their loan requirements on the service’s website. isePankur then verifies all of the borrowers’ information, analyses their bank statements and performs various other checks, just as any commercial bank would do. Individuals looking to invest, then loan their money, spreading the investment between multiple applicants. The loan applicant is able to borrow at exactly the same rate as the investor gets in returns, unlike at a commercial high street bank where both receive different rates.

Again, this service has been praised by many, including one of The Economist editors, Edward Lucas. Read his article on his own experiences with isePankur here.

So what does this mean?

Essentially, this shows that with modern technological capabilities, financial innovation is able to take various creative new approaches. Such peer-to-peer services are likely to have an impact on commercial banking activities, but only if they gain the trust of their customers. The benefit of having a commercial high street bank, is that it is a physical place which people feel secure about, as opposed to an online service which takes place in a cloud and could easily disappear at any moment. It remains to be seen how much of an impact these companies will have, but initial responses have been positive and many consumers are already beginning to take advantage of such financial innovations.

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Busy Times, Postgraduate Study & Internships

So it’s been a while since I last found the time to update the blog. Unfortunately, going into the final year of my undergraduate degree has taken up a significant amount of my time. As well as work for university, I’ve also been dealing with various applications for internships in the summer of 2013 and postgraduate programs for 2013/14, which leads me to…

One small request…

In order to help me find summer internship opportunities, I would greatly appreciate it if you take a look at my online Visual Résumé (or my LinkedIn) and then share it, refer it to others or even contact me directly if you know of any interesting internship opportunities.

What am I looking for?

I have 5 months of work experience at two of Scandinavia’s leading banks and have the top grades on my course at a leading UK university. I am open to any opportunities within Management Consulting, Investment Banking, Asset Management, Corporate Banking, Risk, Accounting or any other fields that you think I might be suited to.

Where would I like to work?

Ideally, I’d prefer opportunities based in London since this would save me money on the costs such as accommodation. However, I am also willing to travel elsewhere in the UK or abroad, as long as I am able to find a way to finance my costs. As I said, this is simply to help me in my job search so that I could find work that suits me, at a company that values my skills. Any help with this is greatly appreciated.


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Celebrating The Greek Credit Event

Finally, the ISDA (International Swaps & Derivatives Association) has decided today that a restructuring credit event has occurred in Greece.

Has there not already been restructuring of Greek debt?

It is true that there have already been write-offs by holders of Greek debt, however, a restructuring credit event occurs when restructuring is involuntary. Surprisingly the debt write-offs were previously considered to be “voluntary”, even though this required a lot of convincing of private creditors. Today though, the Greek government announced that it will activate its Collective Action Clause on Greek bonds.

What does the Collective Action Clause (CAC) mean?

The CAC is an agreement that if a certain percentage of Greek debt holders agree to a write-off, the remaining debt holders can also be forced into writing off their part of the debt. Since this clause has now been activated, the restructuring is no longer voluntary, and so a credit event has occurred.

So why should we be happy about a credit event having occurred?

The good thing about the restructuring finally being considered a credit event, is that any insurance that was purchased by private sector creditors and governments would now be triggered. Many holders of Greek debt had purchased Credit Default Swaps (CDS) in case Greece were to experience a credit event, and now that one has occurred, the CDS have finally been triggered and creditors receive their payments.

What if the restructuring had not been considered a credit event?

If a credit event had not occurred and CDS payments had not been triggered, many private creditors would have possibly begun to wonder as to whether there was any use for CDS at all. After all, if Greece’s debt restructuring isn’t considered a credit event, then what is? As a result, CDS agreements would have been deemed worthless, causing both private creditors and governments who hold CDS, to write off their value and possibly land in even greater financial trouble.

So there you go, there’s a part of Greece’s failure that we can finally be happy about.

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#Finance100 – A Couple Of Suggested Twitter Feeds

With Economia having released their Twitter #Finance100 list a couple of days ago, I thought it would be an appropriate way to start off this blog, with a couple of suggested feeds to keep up to date with the latest economics news.

What is #Finance100?

The list essentially ranks individuals and organisations involved in economics and related areas, based on their PeerIndex score, a score between 0-100 indicating how influential they are on Twitter.

Who to follow?

Currently the top 5 Twitter feeds are as follows:

1) Nouriel Roubini – Economist, renowned for anticipating the 2008 housing crash and financial crisis.

2) Robert Peston – Journalist, business editor for the BBC.

3) Paul Mason – Journalist, economics editor for BBC’s Newsnight.

4) The Economist – Weekly News Publication, specialising in economics, politics and international affairs.

5) Tim Harford –  Economist/journalist, author of various books including The Undercover Economist, and more recently Adapt.

Of course this ranking is likely to change over time so be sure to check the full list for an updated ranking.

+ A Couple of Extras – My BlogRoll

As well as feeds on the #Finance100 list, I will be adding some of my favourite economics blogs to the BlogRoll at the bottom of the page. Some of these are only recently becoming popular and so did not make the #Finance100, but they are definitely worth a read. Be sure to check them out!

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Who am I?

I am a BSc Economics student, interested in the world of economics, banking and finance.

Why did I start this blog?

I started this blog so that I could collect and share various interesting articles that I come across in newspapers, magazines, blogs, etc.

What will be posted?

I will try to make a couple of posts each month (more frequently if I manage to find the time), highlighting articles by leading economists which would be of interest to other economics students and enthusiasts.

Anything else?

I would just like to mention that any opinions that you might have on any of the articles that I post are more than welcome and I would be very keen to discuss/debate any issues…


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